Question: ABC is attempting to establish a current assets policy Fixed
ABC is attempting to establish a current assets policy. Fixed assets are $600,000, and the firm plans to maintain a 50% debt ratio. ABC has no operating current liabilities. The interest rate on debt is 10%. Three alternative current asset polices are under consideration: 40%, 50%, and 60% on sales. The company expects to earn 15% before interest and taxes on sales of $3 million. The tax rate is 40%. What is the ROI under each alternative?
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